My sincere thanks to the Insurance Fraud Bureau (IFB), Office of the Attorney General, and insurance company well-wishers at my February retirement dinner after 29 years with the IFB.
Operations today are quite different than they were when we started in 1991. Gone are the old company referral forms, replaced some 15 years ago by IFB referring icons on all company SIU claim file screens. A mere "click" delivers the relevant subjects, vehicles, providers, and fraud loss dollars as well as all primary and linked files for the IFB investigation. The now ten-year-old expert evaluation system sets preliminary probabilities for successful investigation and prosecution. That evaluation then resides in both IFB and the company files, automatically updated as new information is developed by our staff.
Years ago it took from six months to three years to close a case completely. It is now a rare month indeed when the "over-six-month" backlog reaches double digits. The complete integration of databases, the now five-year-old VJL (virtual judge and lawyer), and the standardization of home confinement sentences in terms of the number of "I Love Lucy" reruns endured, all contributed to the streamlining.
Finally, our core mission to eliminate insurance fraud comes even closer as evidenced by next year's average Auto insurance rate of less than $1,200, about $575 in 1996 dollars. But with all the technological changes, some things remain constant--like the Chief's millennium 2000 bowtie.
Convictions - 132
IFB's Helping Hands
According to Chief of Investigation, "Workers' compensation premium fraud
cases have been put on the front burner to turn up the heat on employers who
steal."
AUTOMOBILE HIGHLIGHTS
"Like Father, Like Son" Case Update
SEEKONK- A Seekonk businessman reported the alleged theft
of his company-owned BMW, office equipment and tools. He allegedly
concealed the items and collected over $29,000 in insurance from
Hanover Insurance Company. His son allegedly staged the theft
of his sister's BMW 325i and collected $13,000 in insurance money.
Wayne Clark Jr. pled guilty to charges of receiving
and concealing a stolen motor vehicle to defraud the insurer on
March 29, 1996 in Bristol County Superior Court. His sentencing
was stayed pending his cooperation in the prosecution of his father.
Staged Auto Accident and Theft
CAMBRIDGE- Three men allegedly staged a hit- and-run accident
in which the driver and his passenger claimed injuries. The vehicle
was allegedly hit by an auto that was registered to the third
subject's mother. In a statement taken by the insurance carrier,
Trust Insurance Company, this subject's live-in girlfriend stated
that the accident was planned among the three men. After the
staged collision took place, the subject reported to police that
his mother's vehicle was stolen to corroborate the hit-and-run
story.
Complaints were issued against three men on counts of motor
vehicle insurance fraud, attempted larceny and conspiracy in
East Cambridge District Court on January 25, 1996. Ismael
Alejandro, the subject who reported his mother's vehicle stolen,
pled guilty to insurance fraud and conspiracy on March 21, 1996.
He was sentenced to one year probation for each charge. Trials
for the other two subjects are pending.
"Owner of Glass Repair Company" Case Update
RANDOLPH- A Randolph glass repair company owner/operator
collected over $56,000 in illegal insurance payments by submitting
false claims to seven insurance companies in which he inflated
the value of the glass he installed. The subject masked the parts
numbers and submitted bogus invoices in order to conceal the fraud.
Insurance carriers he cheated were Commercial Union, Hanover,
Safety, Travelers, USF&G, CNA and Liberty Mutual.
Irving Shubert, owner/operator of Nationwide Plate
and Auto Glass Service Company, pled guilty to multiple charges
of insurance fraud, larceny and attempted larceny on March 12,
1996. Charges had been filed in Norfolk and Suffolk Superior
Courts. Shubert was sentenced to serve 59 days in jail followed
by three months in home confinement on an electronic bracelet
and five years probation. He was also ordered to pay $56,905
in restitution to the insurance carriers.
Another fraudulent scheme was the billing for different glass replacement
parts. While the bill might indicate the windshield was replaced, a
company re-inspection would reveal a side window, vent window, or clear
glass instead of tinted or bronze glass would be installed rather than
the item that actually appeared on the bill.
If you have any tips or ideas that your company would like to
communicate to the other carriers, please forward them to the IFB.
But My Garage Really is Located on the Other Side of the State!
LAWRENCE- Three subjects allegedly claimed their vehicles
were garaged in different towns of the state from where the subjects
lived in order to save on their insurance premiums. One
woman, who owns two vehicles kept in Lawrence, claimed to Safety
Insurance Company that her automobiles were allegedly garaged
in Methuen which saved her $491 in premiums on each vehicle. A
Lawrence couple, who own two vehicles, claimed to Liberty Mutual
that their vehicles were allegedly garaged in Boxford and saved
a total of $954 in insurance premiums.
Three Lawrence residents were issued complaints in Lawrence
District Court on March 20, 1996 on charges of insurance fraud
and larceny.
Insurance Agent Charged With Fraud
BROOKLINE- A former Brookline insurance agent allegedly
diverted premiums paid to him by customers for insurance coverages
that they believed existed. Based on the agent's actions, individuals
and business entities believed they had various lines of insurance
coverage when no coverage was in fact secured on their behalf
or, if coverage had been secured initially, had coverage canceled
for non-payment of premium. In some cases, the agent would sign
his client's name to a financing agreement for the insurance policy
after he had already collected the full insurance term premium.
The agent would then use this money for his personal use and he
would pay the financing company's installment payments. The agent
allegedly secured coverage for his clients through Travelers,
Amica Mutual and Arbella Mutual Insurance Companies.
On February 12, 1996 in Brookline District Court, complaints
were issued against a former Brookline insurance agent on multiple
counts of insurance fraud, larceny, attempted larceny and forgery.
A complaint was issued against a second subject on a count each
of insurance fraud and attempted larceny for his involvement in
the case.
Taxi Service Prohibited for Personal Autos
LAWRENCE- Three Lawrence men allegedly paid automobile
insurance premiums based solely on personal use of the vehicles
they operated as taxicabs. The subjects paid minimum personal
insurance on their vehicles, about $1,000, when they should have
paid the proper, higher rate for taxicabs which is close to $4,000.
Complaints were issued against each subject in Lawrence District
Court on March 20, 1996 on charges of insurance fraud and larceny.
"Malden Man Claims Similar Injuries" Case Update
MALDEN- A subject was employed as a subcontractor for a
cab company when he ran his taxi into a tree. He claimed injuries
and applied for PIP benefits. He retained an attorney to represent
him for the claim. The subject was also involved in a two-car
collision about seven months previous to this incident. Claiming
the same injury, he filed PIP for the initial accident only two
weeks before filing for PIP benefits for the second accident.
He retained a different attorney for each accident claim. The
carriers, Royal and American Transportation Insurance Companies,
discovered the subject's claim history through the Central Index
Bureau and learned that many of his claimed injuries were similar.
A Malden man pled guilty to motor vehicle insurance fraud and
attempted larceny in Malden District Court on March 6, 1996.
The case was continued without a finding for one year. He was
ordered to pay restitution of $1,702.
"Brother and Sister Act" Case Update
WORCESTER- A brother and sister staged an auto collision
and reported the claim to Arbella Mutual Insurance Company. The
sister claimed passengers in her vehicle at the time of the collision,
one being her brother. The brother is a licensed life insurance
agent in Massachusetts.
Two Worcester siblings pled guilty to insurance fraud and attempted
larceny in Worcester District Court on November 29, 1995. The
brother was sentenced to serve six months in the House of Correction
and to pay $1,500 restitution. The sister received probation and
was ordered to pay $1,000 restitution.
Jinxed Taxi-Cab
NEWTON- A Newton man owned a taxi company which employed
his father who, while driving a taxi for the company, was involved
in a motor vehicle accident in Rhode Island. The vehicle was transported
to Somerville to be repaired. The owner filed a claim for damage
to the taxicab and its loss of use. The following week, the same
taxi was allegedly involved in another accident, this time in
Massachusetts, while it was allegedly driven by the owner of the
Somerville auto body shop. Again, a claim for damage to the cab
and its loss of use was made on behalf of the cab company with
Royal Insurance Company. The appraised damages to the cab on both
claims were identical and the loss of use time periods overlapped.
Complaints were issued against the owner of a Newton taxicab
company and the owner of a Somerville auto body shop on charges
of insurance fraud and larceny in Quincy District Court in February
1996.
To Tell the Truth: Which is the Real Vehicle that was Rear-ended?
BROCKTON- A Brockton man allegedly submitted false claims
to Commerce and Safety Insurance Companies claiming that he was
rear-ended by another vehicle. The alleged collision caused damage
to his vehicle and resulted in injuries to his head, neck and
back in which he collected over $3,000 in medical expenses. However,
the driver of the other vehicle claimed that his vehicle did not
strike the subject's automobile but was rear-ended by the subject
and neither vehicle sustained any damage. A passenger verified
this report. An accident reconstructionist concluded the damage
to the subject=s vehicle was inconsistent with the profiles of
the two vehicles and the accident as reported.
A complaint was issued against a subject in Brockton District
Court on January 26, 1996 on two counts of motor vehicle insurance
fraud and one count each of larceny and attempted larceny.
"Have We Met Before?" Case Update
BRIGHTON- Five subjects had staged a two-car collision
and professed not to know each other. Along with other inconsistencies
in their statements, the vehicle operators were found to have
worked together at one time.
One subject pled guilty and was sentenced to eleven months
in the House of Correction, suspended, ordered to pay $1,755 in
fines and restitution and to perform community service. Another
subject received pre-trial probation and was also ordered to perform
community service. The other three subjects in this staged accident
case have previously pled guilty and have been sentenced.
"Is This a Bus Stop?" Case Update
LOWELL- According to witnesses at the scene, six subjects
jumped into a van minutes after the van was involved in an intersection
collision.
The final three subjects involved in the case were sentenced
after being found guilty in Lowell District Court in November
1995 on insurance fraud and attempted larceny charges. One subject
was sentenced to serve one month in the House of Correction, another
received a year probation and an order to perform 100 hours of
community service and the third subject was ordered to pay $300
restitution. Four of the seven subjects were sentenced to serve
jail time in this attempted larceny case.
Claims Adjuster Authorizes False Checks
ROSLINDALE- A subject, while employed as a claims adjuster
for USF&G Insurance Company, allegedly issued property damage
claim checks on actual and fictitious automobile insurance claims
totaling approximately $12,000. Her brother, who allegedly helped
her in the scheme, received a portion of the proceeds from each
check cashed.
A complaint was issued against a Roslindale woman on counts
of insurance fraud, larceny, forgery and conspiracy to commit
larceny. Another complaint was issued against her brother on insurance
fraud, larceny and conspiracy charges. The complaints were issued
on December 15, 1995 in Quincy District Court.
"You Can't Go Home Again" Case Update
BOSTON- A Lynn man was stopped by U.S. Immigration and
Customs Border Patrol when he attempted to re-enter the country
from Canada driving a Mercedes he and his girlfriend had reported
stolen in Boston. The two had been dining in Boston when the
1985 Mercedes was allegedly stolen. His girlfriend received $24,805
from Safety Insurance Company for the alleged theft. Six months
later, the man was stopped at the border driving the stolen vehicle.
Alan Leavitt pled guilty in Suffolk Superior Court on
December 14, 1995 to larceny and concealment of a motor vehicle
to defraud the insurance carrier. He was sentenced to 18 months
in the House of Correction, 6 months to serve, and ordered to
perform 400 hours of community service upon his release. The trial
for the second subject, a Wakefield insurance agent, is pending.
"Worcester Auto Fraud Ring Broken" Case Update
WORCESTER- A Worcester used car dealer and three other
subjects staged a series of automobile collision accidents and
submitted claims for property damage, medical injuries and lost
wages for those accidents to Commerce, Hanover and Sentry Insurance
Companies. The total value of fraudulent claims submitted was
$60,000.
Abbas Rad was found guilty on four counts each of larceny
and motor vehicle insurance fraud in December 1995 in Worcester
Superior Court. He was sentenced to serve a year in the House
of Correction and to pay over $43,000 in fines and restitution.
The other three subjects had previously been found guilty.
WORKERS' COMPENSATION HIGHLIGHTS
Weekend Brawl Results in W/C Claim
LAWRENCE- A subject reported to his employer on a Monday
morning that he allegedly sustained an injury to his right shoulder
while working the Friday night shift. An investigation conducted
by Kemper Insurance Company revealed that the subject had actually
sustained the injury over the weekend when he was involved in
a fight.
A complaint was issued against a Lawrence man on two counts
of workers' compensation fraud, one count of insurance fraud and
one count of attempted larceny in Westborough District Court on
February 8, 1996.
Injured Woman Cleans Up
FRAMINGHAM- A subject sustained a work-related back injury
and received total temporary workers' compensation benefits from
Liberty Mutual Insurance Company for fifteen months. She returned
to work for about a month and then again went out on compensation
because she could not perform her job duties. Her benefits were
resumed for another year and a half. Investigation revealed that
the woman had been working cleaning houses through the period
she had been collecting benefits.
A Framingham woman pled guilty to workers' compensation insurance
fraud and larceny. The case was continued without a finding.
She was placed on probation for one year and ordered to pay $5,000
restitution and to perform 100 hours of community service.
Heavy Metal Rocker Still Rocks
WEYMOUTH- A Weymouth man claimed that he had suffered
a back injury which totally disabled him from his work as a fork
lift operator. However, during the period of time he was receiving
workers' compensation benefits from Travelers Insurance Company,
the subject was videotaped as he performed as the lead singer
of a heavy metal rock band. Additionally, witnesses testified
to his continued performances with the band throughout the period
he claimed total disability. The subject stated at three medical
examinations that he did not work and was unable to do so.
A Weymouth man pled guilty to insurance fraud in Norfolk Superior
Court on January 9, 1996. He was sentenced to two years in the
House of Correction, suspended, probation, restitution of $6,000
and 125 hours of community service.
Back Injury Doesn't Slow Down this Subject
EDGARTOWN- A subject sustained a work-related back injury.
During the course of her alleged disability, she collected over
$22,000 in benefits from Liberty Mutual Insurance Company. An
investigation by the carrier determined that the woman was working
part-time at a restaurant during this time period. She also claimed
during an IME that she had not worked since the date of the accident.
Investigation also revealed that the subject later began full-time
employment at the restaurant.
A complaint was issued against a subject on a count of larceny
in Edgartown District Court in November 1995.
PREMIUM AVOIDANCE HIGHLIGHTS
"Scheme Results in Multi-Million Dollar Premium Loss"
Case Update
NORTH ANDOVER- Two men planned and executed a fraudulent
scheme to reduce workers' compensation insurance premiums for
two construction companies that one of the subjects owned. The
subjects reduced the workers' compensation premiums by hiding
a portion of the payroll and by misclassifying high-risk positions
to lower-risk positions, such as classifying steel installers
as sales positions. Liberty Mutual Insurance Company estimated
the scheme approached $7 million dollars in lost premiums.
John Boutin, treasurer of N.B. Jon-Son Steel Erectors,
Inc. and N.B. Jon-Son Construction Company, Inc., was
sentenced to serve one year and one day in federal prison plus
three years supervised probation upon release. Boutin was also
ordered to pay restitution of $3,081,707. He had pled guilty
to one count of conspiracy and five counts of mail fraud in December
1995. Norman Bernstein, a financial consultant to the
Jon-Son Companies, pled guilty to the same charges. He was sentenced
to serve 37 months in federal prison, three years of supervised
probation upon release and ordered to pay $2,721,911 restitution.
The men were sentenced by Judge William G. Young in U.S. District
Court. Young, in his final statement, said that insurance fraud
is a crime and that cheating the system affects other businesses
as well, businesses that may well have gone out of business because
they are forced to pay higher premiums to compensate for those
companies, like Boutin's, who perpetrate schemes to avoid paying
their share. When such companies are priced out of the market
or operate illegally, without insurance, their employees suffer
as well.
Scheme to Save Over $637,000 Ends in Conviction
NEW HAMPSHIRE- The president of a New Hampshire temporary
work service company, which provided predominately unskilled temporary
laborers to client companies in eastern Massachusetts for assembly
and clerical jobs, deliberately misclassified these employees
as independent contractors instead of employees of his company.
In this scheme, the subject avoided paying $211,201 in employer
tax contributions during a three year period. In addition, the
subject provided to Liberty Mutual Insurance Company false information
on the number of actual people he employed, thus evading $426,463
in workers' compensation premiums.
Michael Bardzick, president of Golden Labor Service,
Inc. pled no contest to twelve counts of failure to pay employer
tax contributions, four counts of workers' compensation fraud
and one count of a continuing scheme of larceny in Middlesex Superior
Court on April 2, 1996. He will be sentenced in May 1996.
"City Councilman Pleads Guilty to Premium Fraud Evasion
Charges" Update
HAVERHILL- A Haverhill city councilman devised a scheme
to defraud Continental Insurance Company when he provided false
information regarding job code classifications for employees of
his window and siding company. He also falsified salaries of
various employees by establishing a payroll system in which his
company "split" the compensation paid to its workers
into two categories: 40% of the salary was falsely classified
as labor and 60% of the salary was falsely classified as materials.
The subject also defrauded the IRS when he agreed to make an
employee's paychecks payable to another person in order to circumvent
IRS efforts to seize this employee's pay.
William Chase, owner/operator of Valley Window and
Siding, pled guilty to conspiracy to defraud his workers'
compensation insurer and conspiracy to defraud the Internal Revenue
Service in September 1995 in U.S. District Court. He was sentenced
in December 1995 to 18 months in federal prison and three years
supervised probation upon his release.
Dummy Corporation Hides Employees' Wages
BOSTON- A construction company president allegedly understated
his company's payroll in order to reduce the price of his workers'
compensation insurance. He concealed the size of his operation
by paying a portion of his employees' wages through a separate
corporation and concealing those records from the insurance carrier,
Liberty Mutual Insurance Company.
An information was filed against a construction company president
on six counts of mail fraud in U.S. District Court on March
18, 1996.
COMMERCIAL HIGHLIGHTS
What's a Businessman to Do?
GREENFIELD- A Greenfield man is the owner of several businesses,
including a realty office and a tavern. When a theft of $6,000
in receipts was discovered at the realty company which is located
above the tavern, the subject reported to police that the money
had been placed in the office by the bartender. However, he claimed
to St. Paul Fire Insurance Company that held the coverage for
his realty office that the receipts were for rent money. The
subject carried no coverage for the possibility of theft of monies
from the tavern.
A complaint was issued against a businessman on charges of
insurance fraud and larceny in Greenfield District Court on January
2, 1996.
PROPERTY HIGHLIGHTS
IFB Progress Report
(through March 31, 1996)
Individuals Indicted - 132
Complaints Issued - 150
Cases Referred for Prosecution - 297
An IFB Fraud Alert was circulated at the onset of this investigation
notifying insurance carriers of two possible methods of false
billing in which glass repair companies could commit fraud. One method,
utilized by Irving Shubert, involved the use of valid glass replacement
prices, materials required and estimated labor hours based on the
NAGS "Glass Parts Calculator" that is used by claims adjusters. However,
upon close scrutiny of a bill, the item numbers, though valid, would
actually be for a different, higher-price vehicle model. Shubert
routinely billed carriers for replacement glass, parts and labor costs
that inflated the accurate price by approximately $300 per claim.